| Fiji Islands - BL Naidu & Sons Ltd v Saulekaleka Enterprises Ltd - Pacific Law Materials |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION NO. 380 OF 1998
BETWEEN:
:
B.L. NAIDU & SONS LIMITED
Plaintiff
AND:
SAULEKALEKA ENTERPRISES LIMITED
Defendant
Mr. A. Tikaram he Plhe Plaintiff
Mr. T. Fa for the Defendant
DECISION
The plaintiff B.L. Naidu & Somited and defendant Saulekaleka Enterprises Limited are both limited liability city companies.
On an application made ex parte by the plaintiff, I made an order on 31 July 1998 granting an interim injunction restraining the defendant
from presenting a winding-up petition against the plaintiff and from advertising it in the daily local newspapers and the Fiji Republic
Gazette. The Summons was returnable for 17 August 1998.
On the day of the hearing the plaintiff applied for the interim injunction to continue whereas the defendant wanted it to be dissolved.
I have before me for my consideration the affidavit of the plaintiff in support and the affidavits of the defendant in response to
the plaintiff's affidavit. I also have written submissions from both counsel which I found to be very useful.
In this action issued on 31 July 1998 the plaintiff made certain claims against the defendant. Whereas the defendant had threatened
to wind-up the company and is also claiming certain sum of money. The defendant on 23 June 1998 served on the plaintiff a notice
under s221 of the Companies Act demanding the sum of $87,726.00 allegedly due and owing by the plaintiff to the defendant for goods sold and delivered between the
month of December 1993 and March 1994.
I have considered the contents of the affidavits from both sides and have come to the clear conclusion that there are substantial
disputes in regard to the respective claims. No purpose will be served by my reiterating what is already in the said affidavits in
regard to the disputed items of claim.
The issue before me is tantamount to an opposed winding up Petition if one had issued and the same principles would apply as if the
Petition was in existence.
There is a general principle that a petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the
process of the Court and should be dismissed with costs (PALMER'S COMPANY LAW Vol 3, 15.214 and cases cited therein).
In PALMER'S (ibid.) is set out the principles involved in considering disputes as to debt and I have borne these in mind in considering the matter
before me. There it is stated:
"To fall within the general principle the dispute must be bona fide in both a subjective and an objective sense. Thus the reason
for not paying the debt must be honestly believed to exist and must be based on substantial or reasonable grounds. "Substantial"
means having substance and not frivolous, which disputes the court should ignore. There must be so much doubt and question about
the liability to pay the debt that the court sees that there is a question to be decided. The onus is on the company "to bring
forward a prima facie case which satisfies the court that there is something which ought to be tried either before the court itself
or in an action, or by some other proceedings."
In OFFSHORE OIL N.L. and INVESTMENT CORPORATION OF FIJI LIMITED (Civ. App. 29/84 F.C.A. at p.15 of cyclostyled judgment) BARKER J.A. said:
"The law is clear that there is a discretion in a Court seized of a winding-up petition, to decline to hear the petition where
the debt is contested on substantial grounds."
Also in BATEMAN TELEVISION LIMITED (IN LIQUIDATION) AND ANOTHER v COLERIDGE FINANCE COMPANY LIMITED 1971 NZLR p.929 Judicial Committee, it was held:
"3. The general rule is that an order for winding up will not be made on disputed debt but Judge has discretion to make a winding
up order on disputed debts which is not reviewable unless exercised on a wrong principle or the judge included or omitted consideration
of a relevant fact or was wholly wrong".
It can be clearly deduced from Mr. Fa's submission that there is a substantial dispute between the parties and the differences can
only be resolved in the trial of the action. Since the plaintiff has already commenced the action (this action No. 380/98s) the defendant
has the opportunity of filing a Defence and counterclaim for his claim which is the subject matter of the said statutory demand.
Therefore on the facts and on the law applicable the demand under s221 cannot ground the right to file a winding up Petition against
the defendant. A real dispute turning on disputed questions of fact which require viva voce evidence cannot properly be decided on
petition. It was held In re Company No. 00212 of 1995 The Times Law Reports (1995 p.186) that in such a situation "the correct course was to strike out the petition, whether the company was, or was not solvent at the time". It was also stated by WALKER J that "where there was complex rift of disputed facts and allegations on both sides which cried out for cross-examination, it was inappropriate
for a claimant to resort to a petition to Wind up a company which was his adversary." (IN re AMADEUS TRADING LTD, The Times Law Reports 1 April 1997 p.36). On the totality of the evidence there were here triable issues such as would entitle the
company to resist a Petition if there was one. I conclude with the following extract from MEGARRY J's judgment in In re LYMPNE INVESTMENTS LTD (No. 00250 of 1971) 1972 1 WLR 523 at 527 which is apt:
"Nor is it right, or in accordance with the modern practice, to stand over the petition in order that the disputed issues may
be resolved in other proceedings. That practice, I may say, seems to stem from In re London and Paris Banking Corporation [1874] UKLawRpEq 171; (1874) L.R. 19 Eq. 444. The Companies Court must not be used as a debt-collecting agency, nor as a means of bringing improper pressure to bear on a company.
The effects on a company of the presentation of a winding up petition against it are such that it would be wrong to allow the machinery
designed for such petitions to be used as a means of resolving disputes which ought to be settled in ordinary litigation, or to be
kept in suspense over the company's head while that litigation is fought out. Further, Mann v. Goldstein [1968] 1 W.L.R. 1091, cited with approval in the New Zealand Court of Appeal in Bateman Television Ltd. v. Coleridge Finance Co. Ltd. [1969] N.Z.L.R. 794, provides authority for saying that when a petition is based on a debt which is disputed on substantial grounds, the petitioner is
not a "creditor" within section 224(1) of the Act of 1948 who has the locus standi requisite for the presentation of the
petition, even if the company is in fact insolvent."
For these reasons the interim injunction is to continue until the hearing and determination of this action with costs against the
defendant in the sum of $150.00 to be paid within 14 days.
D. Pathik
Judge
At Suva
1 December 1998
Hbc0380d.98s
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